The inverse cup and handle is a bearish continuation or reversal pattern that mirrors the bullish cup and handle formation. It consists of a rounded top (the inverted cup) followed by a brief upward consolidation (the handle). The pattern indicates that buying attempts fail to sustain higher prices, and the handle's upward drift represents a final weak rally before sellers take control, breaking price below the handle's support.
The inverted cup forms a rounded top as buying momentum gradually fades. The handle is a small upward-sloping consolidation that follows the cup formation. Volume typically declines during the handle phase as conviction wanes. The breakdown occurs when price falls below the handle's lower boundary. The measured move target equals the depth of the cup projected downward from the breakdown point. The pattern gains significance when it forms below major resistance or at the end of a relief rally within a downtrend.
Enter short when price breaks below the lower boundary of the handle with volume expansion. Wait for a retest of the broken handle support as new resistance for a lower-risk entry. Confirm with momentum indicators turning bearish and divergence during the handle formation. Enter when the breakdown candle is larger than recent range candles, indicating conviction.
Target the measured move — the cup depth projected from the handle breakdown point. Stop above the high of the handle — if price reclaims the handle, the pattern is invalidated. Partial profits at the first significant support level. Exit if selling pressure diminishes and the breakdown stalls above the target.
4H, Daily, Weekly
The inverse cup and handle is most reliable when it forms within an existing downtrend, serving as a continuation pattern. When it forms at the top of an uptrend, it can signal a major reversal but requires additional confirmation from volume and momentum. The handle should be relatively shallow and short in duration compared to the cup — an oversized handle suggests the pattern may be morphing into a different formation.
Pennants are short-term continuation patterns that form after a strong directional move. They resemble small symmetrical triangles, with converging trendlines creating a compact consolidation zone. Unlike flags, which have parallel channels, pennants converge to a point. The breakout typically occurs in the same direction as the preceding move, with the measured target based on the flagpole.
Double tops and double bottoms are two-touch reversal patterns that form when price tests the same level twice and fails to break through. A double top signals bearish reversal after an uptrend, while a double bottom signals bullish reversal after a downtrend. The pattern is confirmed when price breaks the support or resistance level formed between the two peaks or troughs.
Bull and bear flags are continuation patterns consisting of a sharp price move (the flagpole) followed by a brief, counter-trend consolidation channel (the flag). Bull flags slope downward after an upward pole; bear flags slope upward after a downward pole. These patterns represent a pause in strong momentum before the trend resumes, and they are among the most commonly traded continuation setups.
Ascending triangles form when price creates a horizontal resistance line at the top and a rising support trendline at the bottom, indicating buyers are becoming more aggressive. Descending triangles feature a horizontal support floor with a declining resistance trendline, suggesting sellers are gaining control. Both patterns are typically continuation patterns that resolve in the direction of the prevailing trend with a measured move target equal to the triangle's height.